Hacker News Reader

Comment by qaq | Hacker News Reader

One thing that is confusing most loud supporters of Web3 are VCs and yet: "It all comes down to the database that sits behind an application. If that database is controlled by a single entity (think company, think big tech), then enormous market power accrues to the owner/administrator of that database.

If, on the other hand, the database is an open public database that is not controlled and administered by a single company, but instead is a truly open system available to all, then that kind of market power cannot be built up around a data asset" So why are they flowing billions of dollars into this ? If there is no locking what will create outsized returns for them?

View on HN

In theory, these web3 platforms would still need to function as a business to continue existing. Moving the platform onto a blockchain removes the need for centralized servers, but it necessitates massive amounts of distributed compute power to keep it going.

Every blockchain project knows that they need to incentivize their miners somehow. This is usually a combination of fees from users and new tokens minted via built-in inflation (yes, inflation ironically powers much of the crypto space and will continue to do so for a long time).

So I always aks:

1) What problem are these web3 platforms solving?

2) Who are they solving it for?

3) Are those people actually willing to pay the blockchain premium to use a web3 platform over a centralized platform?

The theory, of course, is that blockchain will evolve over time to become less resource hungry and therefore cheap enough to compete with incumbents, but that's a long way away. Many projects have started cheating by smuggling centralization into their architecture but emphasizing their blockchain and hoping nobody cares enough about the difference.

But where do VCs come into the equation? They're not setting up the mining operations that will power these businesses and collect the fees in the future. They're investing in tokens that will ostensibly be used to pay the miners in the future.

The whole game is about introducing artificial tokens, quietly giving a huge number of those tokens to founders and early investors (in exchange for actual money, of course), and then hyping the platform to the moon so everyone can cash out their tokens to a new wave of speculators.

> introducing artificial tokens, quietly giving a huge number of those tokens to founders and early investors (in exchange for actual money, of course), and then hyping the platform to the moon so everyone can cash out their tokens to a new wave of speculators.

In other words a Ponzi-scheme

It's a ponzi-scheme if there's no value behind the hype. it's not inherently a ponzi scheme. It's the same way in the current private equity start-up world just that only VC's and connected individuals are exposed to the all the risk and all the profit.

> It's a ponzi-scheme if there's no value behind the hype

But what's the value ?

I am still after a few years now trying to understand what it actually is.

There isn't any.

Some coins, mebe there's some lulz??

But that's it.

Yer lulz worth that much to you?

Yeah, it turns our that VC speculation is a load of BS too, and that this is the latest way they're trying to end run around the SEC.

You could say that there is value behind a Ponzi scheme as long as there are more people willing to get onboard the Ponzi scheme. A Ponzi scheme can make a few "early adopters" rich

1. Because it's a ponzi scheme and they get to get in on the ground floor. See: https://mobile.twitter.com/intangiblecoins/status/1473302581...

2. Because they're rich libertarians who see crypto as a way to protect their assets from the government

Perfectly summarized.

The only thing more annoying than libertarian crypto bros is progressives who don’t like crypto because people have made money off it or they see it as inherently right wing technology (the Soviet Union said that about computers originally, you can see how that worked out for them)

Maybe so, but they’re not in this thread.

Criticising the whole shebang as a bunch of charletans pitching snake oil to the gullible isn’t “progressive”, it’s common sense.

Everyone loves to say their politics are just common sense but characterizing all of crypto as “rich libertarians who see crypto as a way to protect their assets from the government” is an inherently political narrative and it simply isn’t true.

There’s also a big difference between valuable emerging technologies that have a lot of speculative investments & charlatans selling snake oil vs “the whole shebang”.

The post I was replying to was asking why some VCs are pumping so much money into crypto. I'm not characterizing all crypto supporters as libertarians, just the VCs who pretend that they're investing in it because they want decentralization and open democratized platforms that are owned by the users.

Ahh yeah I misread that a bit. Still I don’t necessarily think that’s accurate even regarding the VCs. Their investments and goals sort of run counter to the libertarian types in the crypto community who tend to be focused more on monetary policy or privacy concerns. If anything what the VCs are doing imo is subverting cryptos ability to meet any of the goals of libertarians by focusing most of the development effort in crypto on centralized platforms that look a lot more like traditional tech companies.

This rather parochially presupposes the whole world operates on the same basis as the two-bit low-grade binary oppositional shit-flinging that passes for political discourse in the USA, or even cares much about it.

Fortunately, that isn’t how this works. Since I don’t live in the US or read its tattered, overwrought media except by accident, I can comfortably say “what political narrative are you on about mate”, and make my analysis free of whatever baggage that entails.

Which leads me back to saying, no thanks. What’s being peddled here creates no fundamental value, so the only beneficiaries are middlemen, their equivalents, and their proxies.

Repeating a narrative that was crafted with a particular political intent is furthering that intent regardless of how you’re thinking about it internally. And unfortunately us Americans are really good at exporting our shittiest ideas everywhere else (especially Western Europe) so it still has meaning regardless of where you live

Except I'm not "repeating a narrative", I'm drawing my own conclusions.

The assertion that anyone who disagrees with (whatever) must have been brainwashed by something they read is pathological for debate.

Honestly, I though NFTs were just a tax loophole to begin with.

Consider a few simple examples -

It is possible to buy crypto purely peer to peer e.g just 2 people posting on a forum. Yet, most people buy it on an exchange and pay the transaction fees.

It is possible to set up a wordpress server on your home PC or a cheap VPS, yet most people buy it off wordpress.com

It is possible to replicate an ETF with relatively low effort by just looking up their holdings every month and rebalancing, yet most people pay the ETF fees.

It is possible to make great coffee at home yet people go to coffee shops.

---

The main idea IMO is just relying on people to be willing to buy into whatever new thing has a lot of marketing and hype behind it. They consistently do. Even if web3 is a truly open system, people will remain too apathetic to learn how that system works - they will just go to the most popular platform and pay the fee.

---

The other angle IMO is that banks and tradfi in a lot of places really do suck hard. They don't need to innovate at all and rarely do. The only reason they don't have competition is piles of red tape, regulation, lobbying, corruption etc. All it takes is someone to make a half-decent website/app that makes things a little better (e.g Robinhood) and crypto is a way to do that while getting around all the old regulation.

> The main idea IMO is just relying on people to be willing to buy into whatever new thing has a lot of marketing and hype behind it. They consistently do. Even if web3 is a truly open system, people will remain too apathetic to learn how that system works - they will just go to the most popular platform and pay the fee

Then why not do it on web2? Web2, as it relies on trusted authorities, is fundamentally cheaper to run than web3.

> It is possible to replicate an ETF with relatively low effort by just looking up their holdings every month and rebalancing, yet most people pay the ETF fees.

ETFs rebalance without incurring capital gains, which is a massive advantage.

> Then why not do it on web2

Because you need something new and abstract to attract the rubes

The locking is in the company that controls the spec of the protocol and its reference implementation. It’s always been about getting as many people onboard as possible, this time the bait is decentralisation.

Could you explain that business model?

Find some problem that requires a ecosystem. Create this ecosystem and carry a large stake in it. Have the stake be a part of the ecosystem somehow. In the future, once the problem has a solution/ecosystem, start selling parts of the stake.

You do not need to make money from the product directly. Think for example if the Bitcoin creator would get 10 cent every time someone mentioned Bitcoin. Or the easiest business model of them all, sell ads on your org site.

> Think for example if the Bitcoin creator would get 10 cent every time someone mentioned Bitcoin

Eh, how would that work exactly?

> Or the easiest business model of them all, sell ads on your org site

That's great, but I can ensure you: none of us in the cryptocurrency ecosystem wants anything to do with ads. Also, can't really build a big business by having ads on your website.

There are casual games that are mostly funded by merchandise (Angry Birds). The game makes the brand popular, then they sell kid toys and clothing. I don't know exactly how you would get paid by just someone mentioning your trademark, but it might be your business innovation - as in order to reach unicorn status you either need to innovate in the business area, or innovate in the product area - you do not need to innovate in both! (heck it's probably enough to copy/apply an already successful business model on an already successful/invented product, but in a combination that no one yet has tried)

> I don't know exactly how you would get paid by just someone mentioning your trademark, but it might be your business innovation

If we're just making up "business innovations" willy nilly, why not just create a company that prints money from used t-shirts instead, I guess that would make a lot of money for the business.

> I don't know exactly how you would get paid by just someone mentioning your trademark, but it might be your business innovation

Why not go bigger and get paid any time people say anything?

One company controls the specification and reference implementation. These gimmicks tend to be "open" so contributions can flow in from anywhere, but the company has full priority and benefits by controlling the pace and final result.

Outsider contributions are submitted publicly, while features developed by the company start in secret and can remain secret as long as possible. The company's contributions are rammed through while outsiders contend with endless bikeshedding with no guarantee they will get anything they need.

In the end there is no sensible reason for any other entity to partner with the controlling company. The partner finds they are prevented from innovating while being bogged down by the "process." The controlling party then seeks to cannibalize the partner's product during this time by shelving any of their unique features and ideas. Once the partner moves on, the requisite changes and fixes to the specification are magically pushed through.

I wouldn't call this a core business model as much as an enhancement to one. Fundamentally it's an attention grift -- a bamboozle of complex rules, procedures and processes, cloaked in goodwill, and furnished by a large interest and future hope at any given time.

Except all these things can be trivially forked. If you don't like how the VC one is doing things, just fork it. There are a billion forks of everything in the crypto space, for exactly this reason.

It’s easy to fork the code but not the user base.

yes, when was the last time you see google chrome forked and adopted a large user base? That is event with big VC money behind it Brave for example. Open source is now days used a marketing scheme to attract developers to work for free, and attract user to think that is open.

There are hundreds of open source projects that implement a social network.

So does that mean I can be the next Facebook with one click of a deploy button ?

Facebook wasn't the first social network. Not even close. Facebook succeeded because it did very similar things to the prior ones, but a little bit better than them in just the right ways. That is the essence of a fork.

There are a "billion" forks in the crypto space, but have any surpassed the original project in quality or adoption?

Sushiswap did for a bit, iirc. It's doing quite well either way, though.

>One company controls the specification and reference implementation. These gimmicks tend to be "open" so contributions can flow in from anywhere, but the company has full priority and benefits by controlling the pace and final result.

Google Chrome for example

Google doesn't control the w3c. And Google Chrome is severely limited in what they can push due to threatened/actual anti-trust litigation. Their whole "privacy sandbox" thing is being done under the scrutiny of quite a few governments in addition to practically every digital advertising association on earth.

True. But they can implement non-standard things. And they're not compelled to implement the standards. And sometimes they don't.

but they are not company people?

company does not own anything nor database?

I think just coins?

Almost all web3 projects issue their own tokens. Before they allow you to buy any of these tokens, they reserve part of the supply to the dev team and VCs. The rest of the supply is issued to the community.

If the project/token is successful, the monetary value of the token rises, which funds the development teams and helps VCs to get a return.

So as always, big capital gets the early access, and us mortal do not.

Still, for a serious project it's not as bad as it sounds. It could still end up meaning the project is 75% community owned, rather than the 0% in a fully central organization.

You should apply scrutiny though to the "decentralized" claim. Most web3 projects aren't very decentralized at all.

I wouldn’t think too far into this. All that is required is the application of experience and appropriate cynicism. The tech isn’t even relevant and neither is the reality.

web3 is a marketing term and is easy to leverage hype on as it implies progression and a new arena of opportunity.

By the time anyone has peeled off the marketing and realised it’s the same old bullshit people will be too far in to admit it and death march over the horizon.

My theory:

Some people believe that this type of decentralization could be a force that can't be stopped by traditional companies and want to get in as soon as possible so they don't end up on the losing side of history.

Of course, rich people simply diversify their assets and crypto is just one of many bets they do, so it's not 100% sure this will happen.

Because experienced VCs know web 1.0 also started with decentralized / libertarian ideals, but ultimately early players built walled gardens and gatekeeping around the "world wide web".

They don't want to miss the web3 boat, and they're betting the web 1.0/web 2.0 playbooks still apply.

Agreed. Most of the decentralization talk is Kabuki and it's still about controlling the platform.

Indeed, a world ruled by feudal lords and corporate fiefs still possesses as little liberty as one ruled by a centralized empire.

Less liberty really as the ability of corporations to intervene in your life far surpasses the capacity feudal states had on a day-to-day basis.

Upvoting for the use of kabuki in explaining the melodramatic pantomime of crypto hype, if only we were all more artisanal in building out this nascent blockchain tech. Imagine if tcp/ip were invented today with all this pre-marketing by VCs

Wouldn’t an open database lead to loads of ACID issues or is the point of blockchain to prevent that

It’s a very limited database that is very slow and scales poorly.

The currently most popular implementation of this "open database" (Bitcoin) is indeed slow and scales poorly. But if you start looking into the new ideas, you'll find there are plenty of still decentralized blockchains with much faster confirmation times (even as low as 5 seconds) today.

Which coins have confirmation times that low with the volume of Bitcoin?

The volume has nothing to do with the confirmation time, it's a constant no matter if it's 1 or 10000 transactions. Avalanche, Algorand, Polygon and more fits the bill of very fast transactions, in case you're interested in looking into the matter further.

Nothing can promise constant performance at infinite volume. 10,000 transactions are a tiny number for most modern and popular products these days.

5 seconds is a long time, especially when a normal modern tech stack can do the same things in milliseconds. I'd also love a reference showing that any of these chains can handle 100k requests per second with a latency of a few seconds. I've never seen it.

The amount of space in a Bitcoin block is around 7 TPS.

Other blockchains make decentralization tradeoffs to process more transactions on-chain per second. For example, Ethereum requires better hardware: larger storage, better CPU and more memory. Solana makes even larger tradeoffs: expensive server hardware costing up to $25000, making it pretty much a central service controlled by the few.

The key innovation of Bitcoin is the decentralization; almost anyone can participate and no one can control it. Sacrificing this for negligble is not worth it. Especially since there are smarter ways to scale the system. Even if you could improve throughput by 100x by making the system slightly less decentralized you would still not reach VISA levels of TPS.

The correct way to scale these systems is using off-chain solutions like the Lightning Network. This way you can process millions of transactions per second.

Not only that, but every operation would cost fees, right?

Good luck convincing people that every time they logging into their account or literally do any action will cost them some fees. Refreshed the page? Oops that'll cost ya!

No you see they will have a cache in front of it.

And then eventually that cache will be a database.

And then eventually that database will have some additional data.

And then eventually we will back to where we are today.

Further, open databases will potentially make it harder for iterative change on that data.

Structures and versioning become harder when that is distributed at the protocol/standard level. Right now the web is already distributed, the protocols/standards are open and versioning data/content/apps/endpoints on top of that is easy, but updating protocols/standards takes time. Apps are a second layer to that, versioning is harder as you have to roll out updates and the OSs/standards they are built on are the slower changing part, web3 is even harder as updates and versioning of the protocol/standards AND the data/content on top will need to propagate and there may be pushback and splits/forks as we are seeing ETH being difficult to change core protocols/flows. There may be innovations on this as we go but also turbulence until that is realized.

For some areas like personal data and ledger data not changing much is good. For anything beyond that it makes it harder to change. Versioning and iterative change is already difficult in some cases when a company has full control over the structures. Getting multiple companies to agree on standards is harder, especially when that impacts revenues on those systems. The same will happen with web3 maybe more intensely. Right now even open standards are actively killed off because they share data. Right now "web2" could have shared databases, and there are some, but companies push away from that and actively look to own data which is a problem. However the same will happen with web3 at additional levels including the protocols/standards now.

What may happen is APIs public facades/interfaces/signatures are more atomic/stable and less changing which is always nice to have, with the guts of the structures being more keyed/document data formats. I am always a fan of iterative change that doesn't nuke the public interfaces/facades unless absolutely necessary. It may lead to "cleaner" more generic public interfaces potentially, but it may also lead to stagnate iterations and infighting like current web standards. In a way, web3 is more about standards than what is built on it. Standards can be flexible or not, both with their pros and cons.

In a way with cryptocurrency, the real goal of the investors of web3 is recreating the web with a sort of toll system, that can be good and bad but their aim is collecting on actions on new protocols/standards.

Taking control away from companies for important data like personal data and shared public data may be good, but there is also some trouble ahead and many things to work out. The same type of sharks that capture that data are looking to go lower in the stack and control that area, and extracting fees/tolls on the movement in that structure even if it is an open database. There are pros and cons to all of this.

> In a way with cryptocurrency, the real goal of the investors of web3 is recreating the web with a sort of toll system, that can be good and bad but their aim is collecting on actions on new protocols/standards.

One could argue that today's web is a combination of ad-based revenue and tolls run by (near?) monopolies: app stores, marketplaces, ect... The crypto-like alternatives such as substack and patreon are growing though and will likely have a niche even if/when crypto fails. The centralization of those crypto-like alternatives is a risk though. I recall one substack author giving email-export as a rationale to choose substack but that's a feature that presumably could just be turned off whenever.

What makes these alternatives "crypto-like" other than being less centralized? Are they even less centralized, other than being platforms owned by smaller corporations that choose to (for now) exercise a lighter touch?

Yeah, from the perspective of someone joining a project rather than creating it, why wouldn’t you use ones that explicitly prevent any kind of outsized return for the creators?

> If there is no locking what will create outsized returns for them?

Controlling consensus through proof of stake would give them an advantage.

Because coins are not regulated like stock. An IPO is not something you can do anyway you want.

What happens when I the company create a databse (let's say facebook) and Developer A create more compelling application that facebook company?

1.Where is the controlling part. 2. what facebook internal advantage/motivation to create and hire more engineers and give dopemine to more people?

Saying company facebook own coin which has no value what does this even mean?

Explain to me.

Reply on news.ycombinator.com